Future of your Company in a Non Net Neutrality World

Sometimes I sit back in wonder at decisions made by supposedly learned legal scholars at the Federal and Supreme Court levels in this country and whether they have any idea as to the implications for most of society to their decisions. Then cynically you may think well they are mostly over 60 so that it won’t really affect them. Not to mention their current and potential future level of wealth and their narrow ideological political prisms and you have a situation whereby you wonder if any major decision made for the rest of us may just as well done by a flip of a coin.

Following the Federal Appeal’s Court decision last week to end the Federal Communications Commission (FCC) net neutrality rules, a multitude of opinions from Silicon Valley Internet Entrepreneur, Marc Andressen to Premier Venture Capitalist, Fred Wilson to Netflix to the contestant in the case itself Verizon have come out with various takes on the ruling. Taking all of these in you realize that within the opponents of the rule, which include the majority of the technology industry, there is a wide spectrum of opinions from the pragmatic (Marc Andressen) to the alarmist (Fred Wilson) and it then becomes a case of how does this affect me and frame my opinion.

What is Net Neutrality?

Essentially net neutrality is a mandate upon the owner of the infrastructure and Internet Service Providers (ISPs) to not discriminate between any of the data flowing through it cables or wireless broadcast towers and allow it transfer equally based on request. Practically speaking this means that if Facebook paid Time Warner Cable a fee, that doesn’t mean that they can pass requests for facebook.com at a faster speed than for any other site. Nor does it mean in the same example Time Warner could then go to Twitter or Netflix and demand a fee or other conditions to get the same traffic speed as Facebook.

This egalitarian approach to the Internet is what most believe has allowed the technology boom to occur and constant innovation to happen. Say for example Lycos & Alta Vista (the leading search engines of the mid 90s) were able to make such a deal then Yahoo and later Google may never have had a chance to emerge. If you extrapolate that out you realize that every leading or emerging digital company today probably would never have existed if an incumbent or the ISP could have blocked it.

This same egalitarian approach is mandated by government for other critical infrastructure like electricity and telephone wires as well as water pipes so we can all access things fairly and in the same way. Similarly this previously and to this days allows our economic engine to constantly move forward and for each of us at home every day to not lose or receive compromised access to these essential services based solely on someone else’s or a business’s ability via financial means to get better access.

What are the Implications?

Currently there is a major battle going on for our hearts and minds in the television arena. For decades the cable companies along with the major networks held a virtual monopoly (particularly when viewed city by city) and if you wanted access to certain programming you had to buy a package which probably included a lot of other things you never really wanted. This had become so much the way of doing business that relatively few people complained and accepted this as the way accessed television.

Then along came the TiVo and the Internet and later on YouTube followed by Hulu and then streaming versions of Netflix and iTunes and finally more recently players like Aereo, Roku, Nimble.tv, Chromecast, Amazon Prime Video along with a corresponding decrease in cable TV subscribers and access to content via illegal downloads or streams. For the first time the broadcast networks and cable providers were on the backfoot with customer demand ferociously for modern, mobile and tailored ways of accessing content.

The traditional providers responded with things like access to TV via tablet or mobile, ESPN3, HBO Go, etc. but in general the exodus towards far cheaper methods of accessing content is only gaining momentum. Additionally the fact the many like Amazon and Netflix with well over 100 million people in the US as subscribers between them are now producing their own content to further remove the need for the traditional content providers.

It essentially has put the ISPs, Cable Companies and Major Broadcasters on the defensive and has them resorting to fighting things like Net Neutrality in Federal Court to allow them to have greater say about what travels across their Internet pipes.

Possible Future Internet Plan?

The TV Battles

Apart from the court action taken by Verizon against the FCC, there is also an upcoming Supreme Court case involving most of the broadcast networks fighting TV broadcast disruptor Aereo.

Actually in this case it is not strictly net neutrality that was at issue but it does actually speak to the same issues and equally could be affected by the ruling. The in theory free to air broadcast networks like NBC, CBS, ABC, FOX, etc. can be accessed via an antenna on top of your home building or TV. Now because of the quality and increased apartment style living and thus no access to antennas, a vast majority access these types of channels are seen by viewers not via antenna but via their cable box.

Remember the Federal Government on behalf of the US people grant these networks the right to exclusively broadcast over certain spectrums in the air, as long as they provide access to their networks for free and of course on the side can make billions in ad dollars and syndication rights. This spectrum could be onsold to radio stations or networks like T-Mobile to transmit phone signals so is very valuable financially for the US people.

Over time and increasingly in more contentious battles the broadcast networks have demanded fees from cable providers to retransmit their channel over cable. This has partially been to extract more money and to offset losses in advertising dollars because more people are turning away entirely from TV or watching cable channels or Internet delivered programming and videos. The most recent of these being a major fight between CBS and Time Warner in the Summer of 2013 resulting in many weeks of blackout of that channel in cities like New York and millions of ad dollars in propaganda attacking each other.

Aereo came along with the idea that since people have the right to access these channels for free given they are licensing spectrum from the US people and get special privileges as well that we will install mega antennas around major populations and retransmit that signal to people’s internet connection. They charge a fee for this service and technology but it is around the $10 range which to get approximately 15 channels is far more affordable to a lot of people than paying $50+ to largely access these same channels in a very basic cable tv package along with others they may not want.

The broadcast networks of course don’t like this as this loses their cable subscription stream. However as free networks with all their special privileges are granted spectrum to broadcast and make vast profit off it nothing has really changed other than there being a centralized antenna. Enter the lawsuit versus Aereo which has now reached the Supreme Court with a ruling expected somewhere close to the Summer of 2014. Ultimately if the broadcast networks want to become cable networks and charge then that is fine but they should lose any special conditions they have and give up any spectrum they own for the US Government to then auction it off to the highest bidder.

The Future

If the TV and ISP world want to look ahead they need not look very far. Earlier this month World Wrestling Entertainment (WWE) announced their own television network. Now leaving aside your feelings for professional wrestling for a second, this was a move that was anticipated and planned for the best part of 3 years so wasn’t much of a secred. However most people expected that they would launch their own channel like the NFL or Oprah which would be carried by the Cable Providers. They surprised most by launching a digital streaming only networks accessible via internet, mobile devices and gaming consoles and to carry both historical programming as well as their most valuable pay per view properties and also charged just under $10 per month. Praise from both their global fan base as well as media watchers has been high as along with embracing modern video and social norms like YouTube, this is the first major traditional content providers who shows are still seen on Cable to embrace the new mediums fully.

Google have launched their own Fiber Internet service in Kansas City and Austin with more mooted to come as well as wide free areas of WiFi in places like San Francisco to help try and foster an open internet at least in their current thinking. This along with both voting with wallets by disconnecting from traditional broadcast media and by supporting political action causes has the best chance of ensuring equal access to broadband internet as we do with other essential utilities.

As Fred Wilson says in his post he doesn’t want to in 2015 be turning down funding the potential next Google, Netflix or Airbnb because the counterargument is well how are you going to get noticed when “Disney” or “Fox” has a similar service or could launch a new service and pay to ensure people only see their offering.